About Half of U.S. States Have Right to Work Laws
Twenty-four states have right to work (RTW) laws allowing employees to contract their labor freely with their employer without having to join a union or pay for union representation as a condition of employment. Given that the split between RTW and non-RTW states is about equal,[*] (see fig. 1 below) we can empirically examine the effects that RTW laws have on a variety of well-being indicators to determine whether the laws are beneficial.
Fig. 1 – RTW States and Non-RTW States
Data Source: National Right to Work Legal Defense Foundation
Right to Work States Have Lower Unemployment Rates
RTW states have lower unemployment rates than non-RTW states. In 2012, unemployment averaged 7.0 percent in RTW states compared to 7.5 percent in non-RTW states. (Indiana, whose RTW law became effective February 1, 2012, is included as a RTW state for this year.) Unemployment has been lower in RTW states every year for the last 23 years, with the difference often being a half point or more (see fig. 2 below).
Fig. 2 – Average Unemployment Rates: RTW States Compared to Non-RTW StatesData Source: Bureau of Labor Statistics
Right to Work States Have Lower Absolute Incomes
In absolute terms, RTW states have lower incomes than non-RTW states. If we use real median household incomes as our guide, the average household in RTW states earned $48,324 in 2012, while its counterpart in non-RTW states earned $54,655. Adjusting for inflation, this gap persists, at nearly the same rate, over the past three decades (see fig. 3 below). But that’s not the whole story.
Fig. 3 – Average Real Median Incomes: RTW States Compared to Non-RTW StatesData Source: Department of Commerce
Right-to-Work States Have Higher Incomes When Adjusted for Cost of Living
If we adjust median incomes based on the cost of living, which many economists believe is necessary for an apples-to-apples comparison, we see that incomes in RTW states are in fact higher than those in non-RTW states. This suggests that those living in RTW states enjoy a higher standard of living than those living in non-RTW states.
Adjusting for recent state cost-of-living data, in 2012, the average RTW state household earned $51,345 compared to the average non-RTW state household’s $46,084 (see fig. 4 below).
Fig. 4 – Average Real Median Incomes Adjusted for Cost of Living: RTW States Compared to Non-RTW States, 2012Data Source: Department of Commerce; Top 50 States – Cost of Living by State, http://www.top50states.com/cost-of-living-by-state.html (accessed 11/04/13)
Making cost of living adjustments to incomes also changes the story historically. Using data from Florida State University, James Hohman from the Mackinac Center has shown that median incomes in RTW states nearly track those in non-RTW states when cost of living adjustments are incorporated.
Spending Per Capita and Tax Revenue Per Capita are lower in RTW States
RTW states tax and spend less than non-RTW states. This is likely because unions, which are stronger in non-RTW states, are usually tied to sectors and industries that are close to the government and therefore better able to bid up government spending – and the resulting taxation necessary to fund it.
On average, RTW states spent $9,166 per person in FY2011 while non-RTW states spent $10,845 that same year. On the revenue side, RTW states collected $8,088 per person in FY2011 while non-RTW states collected $9,578 per person over the same period. These taxing and spending disparities have persisted over the past three decades (see figs. 5 and 6 below).
Fig. 5 – State and Local Spending per Capita: RTW States Compared to Non-RTW States
Data Source: usgovernmentspending.com
Fig. 6 – State and Local Revenue per Capita: RTW States Compared to Non-RTW States
Data Source: usgovernmentrevenue.com
RTW States Have Seen a Recent Inflow of Domestic Migration While Non-RTW States Have Seen an Outflow
One of the best indicators of success when comparing different policies of two groups is often the migration patterns between the groups. Here the data is fairly clear: Americans are moving to RTW states and away from non-RTW states. Among other reasons, this may be because they are finding more job opportunities, higher standards of living, and fewer taxes in RTW states than in non-RTW states.
In the two-year period between April 2010 and July 2012, a total of 809,000 American residents moved into RTW states. At the same time, 823,000 American residents left non-RTW states. Out of the ten states with the most domestic in-migration over this period, seven of them were RTW states. At the same time, all of the top ten states with the most domestic out-migration were non-RTW states. The migration map below (fig. 7) represents this movement of people over this period.
Fig 7 – Domestic Migration: RTW States Compared to Non-RTW States, Apr. 2010 – Jul. 2012
Data Source: US Census: Estimates of the Components of Residential Population Change: April 1, 2010 to July 1, 2012
[*] Right to Work Enactments